A sound 45-year-old dwelling stands in a district that is converting to higher-density use. The structure could physically last another 40 years, and its roof has about 10 years of useful life left. Market evidence indicates that the site will be redeveloped and the dwelling will stop contributing to property value in about 15 years. What is the remaining economic life of the dwelling?
Correct Answer
B) 15 years
Remaining economic life is the period from the valuation date over which an improvement can be expected to continue to contribute to property value, which is about 15 years here. The 40-year figure is physical endurance, which can extend beyond economic life. The 45-year figure is actual age, and the 10-year figure describes one component, not the dwelling.
Why This Is the Correct Answer
Option B is correct because remaining economic life runs from the valuation date to the point where the improvement stops contributing to value. Market evidence places that point about 15 years ahead. The building's physical soundness beyond that date does not extend its economic life.
Why the Other Options Are Wrong
Option A: 10 years
Option A selects 10 years, the useful life left in the roof. That describes one short-lived component, while the question concerns the dwelling, which is expected to contribute value for about 15 years.
Option C: 40 years
Option C selects 40 years, the period the structure can physically stand. That describes physical endurance, which can run well beyond the 15 years of expected contribution to value.
Option D: 45 years
Option D selects 45 years, the time since construction. That is actual age, which looks backward from the valuation date rather than forward to the end of the dwelling's contribution.
Standing is not contributing
A building may keep standing after it stops adding value. Economic life follows the value contribution, not the structure.
How to use: Use this when a question offers both physical and market-based life figures for one building.
Exam Tip
Look for the word contribute or its equivalent in the facts. The period of expected contribution from the valuation date is the remaining economic life.
Common Mistakes to Avoid
- -Equating remaining economic life with remaining physical durability
- -Treating a building's actual age as its remaining life
- -Using one component's useful life as the life of the whole dwelling
Concept Deep Dive
Analysis
This tests the difference between how long a building can stand and how long it adds value. Economic life ends when the improvement stops contributing to property value, even if the structure is still sound. Read each figure in the facts and ask which one measures future contribution.
Background Knowledge
Economic life is the period over which an improvement contributes to property value, and estimating it requires studying market factors such as technology, design and neighborhood stage. Useful life is the period over which an improvement performs its designed function, and it can extend well beyond economic life.
Real-World Application
An appraiser inspects a well-built older house in a district shifting to higher-density uses. Although the structure is sound, the market analysis suggests the site will be redeveloped within about 15 years. The appraiser bases the remaining economic life on that market evidence, not on the building's physical condition alone.
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